Bank risk preferences on the government-insured mortgage market
The paper presents the structural model of decision-making process on the residential mortgage market. We empirically estimates key drivers of mortgage borrowing, underwriting, and default process by jointly using market-level monthly data and loan-level data from regional branch of Agency of Home Mortgage Lending (AHML). The multistep estimation procedure allows correcting for sample selection bias and endogeneity and provides consistent parameter estimates. Obtained results shows that risk preferences are changing during the time and AHML borrowers are relatively high risky.